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Turkish Lira crash hits Japanese retailers - Nikkei Review

According to the Nikkei Asia Review, Japanese retail investors have taken a large hit from the collapse of the TRY, which was a hugely popular choice among Japanese cash holders.

Key quotes

"The Turkish lira's plunge has dealt a blow to Japanese individual investors who had snapped up bonds and mutual funds denominated in the currency, possibly forcing them to rethink the strategy of chasing emerging-market products promising high yields.

The Turkish currency was among the most popular among Japanese retail investors -- collectively known as Mrs. Watanabe, alongside such other emerging-country favorites as the South African rand. Trading volume between the lira and the yen has been climbing since May, when the lira began to slide rapidly, with the figure reaching 1.4 trillion yen ($12.6 billion) as of June.

Japanese currency traders, who tend to be contrarian, continued to buy the lira even as it lost value. But the currency's crash since last week has forced many to cut their losses or face margin calls.

The recent balance of lira-denominated bonds stood at about 210 billion yen, according to information company Imperial Finance & Technology. Japanese investors could be even more exposed when taking into account debt issued overseas that is sold through Japanese brokerages.

Lira-denominated instruments became popular for their high yields. Even now, there are bonds on offer at major online brokerages with an anticipated annual return exceeding 20%. But the currency's decline could mean negative actual returns in yen."

Author

Joshua Gibson

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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